Chart of the Day: Anatomy of a Shopping Mall Bubble: China Edition

From Nikkei Asia:

All is not well in China's retail sector. Shopping centers are being shuttered with regularity, as tenants abandon them. Yet the overall amount of commercial space in the country continues to swell. 

The economy's weakening momentum and President Xi Jinping's belt-tightening are discouraging consumption. At the same time, shoppers are moving online, and foreign retailers are reviewing their strategies for expansion in the Chinese market.

The result of these developments: ghost malls.

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Finding tenants is unlikely to get any easier, since shopping centers continue to sprout around the country.

In a quest for revenue, China's local governments eagerly sold land-use rights to real estate developers, which in turn were optimistic about retail prospects in a country where incomes are rising.

According to China's National Bureau of Statistics, the net increase in commercial space came to about 120 million sq. meters last year. If we assume an average facility takes up 50,000 sq. meters, the extra space would be enough to fit about 2,400.

A separate study projects that 50 major Chinese cities will see an increase of 560 million sq. meters this year. That would mean growth of roughly 80% in two years.

But what good is space if you cannot fill it? 

When mall supply grows faster than or outstrips demand, the result would be "ghost malls" (excess capacity).

China's "ghost malls" and US "dead malls" serves as blueprints for the coming Philippine version.